 ▲ A cryptocurrency-related billboard in Hong Kong in 2021 |
Chinese companies barred from issuing cryptocurrencies overseas as well
The Chinese government announced measures to tighten controls on cryptocurrencies, including banning the issuance of yuan-denominated stablecoins overseas without official approval.
According to the website of the People’s Bank of China on the 6th (local time), the central bank and seven other government departments jointly released a “Notice on Further Preventing and Addressing Risks Related to Cryptocurrencies.”
Authorities emphasized that “without lawful approval from relevant authorities, no domestic or overseas enterprise or individual may issue yuan-pegged stablecoins abroad.”
Stablecoins are promoted as being more stable than typical cryptocurrencies because their value is pegged to real assets such as the U.S. dollar or the yuan.
Authorities explained that if yuan-denominated stablecoins are used in the market, they could effectively perform some functions of legal tender in an irregular manner, which relates to China’s monetary sovereignty.
Through the notice, authorities also stated that “without lawful approval from relevant authorities, domestic entities or offshore entities under their control must not issue cryptocurrencies overseas.”
Because cryptocurrencies are based on blockchain technology and transcend the concept of national borders, risks can easily spread across borders, prompting central banks and international financial organizations to remain cautious.
Authorities said the notice clearly reaffirmed a prohibition stance on cryptocurrencies, stressing that all cryptocurrency-related businesses are illegal financial activities and will be strictly banned without exception.
They also reiterated that it is prohibited for overseas companies or individuals to illegally provide cryptocurrency-related services to entities within China.
At the current stage, cryptocurrencies cannot effectively ensure user identification or anti-money-laundering measures, making them susceptible to use in money laundering, fraud, and illegal cross-border remittances.
China previously stated in 2013 that Bitcoin, as a virtual commodity, should not circulate or be used as currency in the market, and in 2021 noted that cryptocurrencies do not have the same legal status as legal tender and that all cryptocurrency-related businesses in China constitute illegal financial activities.
Authorities also said they will continue to rectify cryptocurrency mining activities.
Regarding the background of the announcement, authorities explained that sporadic speculation related to cryptocurrencies and real-world asset (RWA) tokenization has disrupted economic and financial order and undermined the property safety of Chinese citizens.
They added that the measures were introduced to improve supervisory and regulatory policies, prevent and address related risks, and safeguard national security and social stability.
The announcement also comes amid heightened volatility in the prices of cryptocurrencies such as Bitcoin.
Separately, Reuters cited industry assessments saying that the move represents progress by clearly distinguishing cryptocurrencies from RWAs and incorporating RWAs into the regulatory framework.
Disclaimer: This article is provided for informational purposes only and does not constitute investment, legal, or financial advice.